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Photo by COURTESY OF VILLAGE GREEN COS.
Village Green is negotiating to build Statler City Apartments on the site of the former Statler Hilton Hotel.

Seven years have passed since The Roxbury Group first proposed an 80-unit condominium development downtown.

But with an easier road to financing for Detroit apartments than condos — because of lender acknowledgment on the increased demand for central business district rental units — the Detroit-based developer now has its eyes set on The Griswold becoming a $22 million apartment development instead.

The Detroit Economic Growth Corp. received Downtown Development Authority board approval last week to negotiate a development agreement for The Griswold — which would have 80 one-, two- and three-bedroom apartments at Griswold Street and Michigan Avenue.

Separately, Farmington Hills-based Village Green Cos. will also begin development agreement negotiations with the DEGC for Statler City Apartments, a $35 million to $40 million development with 200-250 apartments on the site of the former Statler Hilton Hotel at Washington Boulevard and Park Avenue.

The Griswold was originally proposed in 2007 as condos in five stories atop a 10-story parking garage and retail building next to the Westin Book Cadillac Detroit hotel. But with the recession and an inability to secure financing, the project was shelved that same year.

"As we know all too well, that market spectacularly crashed in a fashion that not only left Book Cadillac (condo) sales in limbo on a project that was already underway, but it really tanked about four or five condo projects downtown," said David Di Rita, principal of The Roxbury Group.

Roxbury was planning to finance the project with a construction loan, which would be paid back through condo sales and a state brownfield tax credit.

"In the days when banks were lending on condo deals, they would essentially agree to provide construction financing conditional to the developer meeting a certain pre-sale requirement, usually 50 percent," Di Rita said. "When you look at the rental project, you're looking at a debt project. The bank is counting on income from the project for many years."

Dennis Bernard

Dennis Bernard, founder and president of Southfield-based Bernard Financial Group Inc., said financing for apartment projects is significantly easier to receive than condominium projects.

"It's easier to prove the depth of the multifamily rental market" to lenders, he said. "You can look at the occupancies of other properties in downtown or Midtown. You can look at their waiting lists, their month-over-month rent increases. You're able to get a better feel for the market downtown."

In the past few years, that market has been improving.

Of the 10,558 downtown apartment units, just 335 (3.1 percent) are vacant, according to Washington, D.C.-based real estate information service CoStar Group Inc. In 2009, the vacancy rate was nearly 15 percent.

The average asking rent is $608 for a studio, $846 for a one-bedroom, $1,328 for a two-bedroom, and $1,407 for a unit with three or more bedrooms, according to CoStar.

The Griswold is expected to be financed with U.S. Department of Housing and Urban Development funding, equity and the state brownfield tax credit from the previous condo project, Di Rita said.

Seventy-five percent of the Statler City project cost would be funded with a bank loan; the rest will come from private equity, according to Brian Holdwick, executive vice president of business development for the DEGC, which provides staff services to the DDA.

Photo by COURTESY OF THE ROXBURY GROUP
The Griswold originally was proposed in 2007 as five stories of condos atop a parking garage. The plan now is for 80 apartments.

The projects are "a great thing because with apartments, you're bringing a younger workforce downtown, which drives your entertainment districts and you have employment to support them," said Kevin Dillon, partner at the Birmingham office of Phoenix, Ariz.-based Hendricks-Berkadia Apartment Real Estate Advisors.

Roxbury is also the developer of the David Whitney Building and the former Globe Trading Co. building along the Detroit River for the Michigan Department of Natural Resources.

Village Green is the owner of the former Millender Center Apartments downtown, which have been renamed the Renaissance City Apartments at Millender Center. Village Green, which operates 160 apartment communities totaling 42,000 units across the country, purchased the 338-unit complex last March for $15 million.

The new apartments will be hot commodities, said Chris Futo, senior associate in the Southfield office of Marcus & Millichap Real Estate Investment Services Inc.

"I don't think it's going to take long to fill them," Futo said.

They would be the first new apartment construction downtown in more than two decades.

"What's missing is a brand-new building that has different floor plans, square footages, amenities, services, being green and technology," said Jon Holtzman, CEO and chairman of Village Green.